valuing a tight gas discovery..., page-9

Interesting, a poster elsewhere has said that on average Sino quote 2 BCF recoverable per well in this area.

So using that figure lets work it out.

2 BCF from ZJS-05

After back in LRL are left with 60%.

60% of 2 BCF is 1.2 BCF net to LRL.

Lets say taking off uplift costs they get 6 US$ per MCF.

1.2BCF is therefore worth 7.2m US$ before tax and royalty.

So lets say 5m US$ after tax/royalty which is 3.1m GBP or 1.2p a share.

So its looks that ZJS-05 success = 1.2p a share to LRL.

So cash + 1.2p a share = 13.2p a share - then why is this at 18p a share BEFORE success at ZJS-05 and flow rates.

Each well they drill, that has success and can flow commercially will add a further 1.2p to the share price it seems, if they can get the "average' of 2 BCF recoverable from it.

And given Camac drilled 4 dusters - success is not a given.

Thats the trouble with very tight gas area's, the fraccing can only work so far from the well bore - and so you get very limited recovery per well drilled.

Wonder how the market will react if LRL say we have good commercial flow and can now extract 2 BCF of gas from this well - will it trigger a mass sell off ?

All eyes are going to be focused on how much gas the company quote as recoverable from this well, if they get commercial flows.